Chains seize market share as independents lose 1.7 billion visits in eight years

Restaurants on high street

Branded foodservice chains are continuing to take huge bites out of their independent competitors as figures released today confirmed multi-site operators have increased their share of the market this year.

Data from The NPD Group shows that Brits are more likely to spend their money at branded outlets when choosing to eat away from home.

Eight years ago, the market share for brands versus independents in visit terms was 43% vs 57%. But for the 12 months to September 2016, the situation has nearly reversed with the brands taking 56% of the market compared with 44% for independents.

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The shift in market share means branded businesses are enjoying 1.2 billion extra visits in Britain’s £50 billion foodservice industry than eight years before (5.03 billion visits YE Sept 2008; up by + 25% to 6.28 billion by YE Sept 2016).

On the same basis, independents saw visits drop from 6.73 billion in 2008 to 5.02 billion in YE Sept 2016 (down 1.7 billion).

The poor performance among independents is reflected in sales figures. Since 2008, brands have boosted annual sales from around £20.9 billion to well over £30 billion today, while independents have seen sales dive from £30 billion to £23.2 billion.

Brands enjoy strong pricing power, having achieved an increase of 16% in the average bill per person over the past eight years versus 4% for independents.

The NPD Group says one factor for the brands’ dominance is the success they are having with young customers. In the pub sector, brands capture 20% of visits among the 25-to-34 age group, way ahead of the 11% figure for independents.

In the full-service sector, brands win 25% of visits in the same age group, ten percentage points more than independents. And in the lower 18-to-24 age group, brands attract twice as many visits as independents (12% vs 6%).

Brands also win in two other ways – breakfast and meal deals. Brands can attribute 14% of their visits to breakfast trade, a much higher proportion than the 8% seen for independents. Brands drive over 36% of their visits through meal deals or promotions, while independents only succeed in driving around 13% of their traffic through this tactic.

The research also shows that brands get more of their business than independents from London (21% vs 13%), winning hands down in market share inside the capital (68% vs 32%). Drill down into London’s QSR and pub markets and the data shows that brands are even better against independents (80% vs 20%).

Cyril Lavenant, NPD’s director of foodservice UK, said: “For the branded sector to have reversed its market share with independents over just eight years underlines how quickly Britain’s foodservice market is changing. Independents are struggling to be relevant and appealing to consumers on the British high street and clearly do not ‘speak’ well to young adults. Foodservice chains do a better job in this respect, especially with meal deals and promotions. Consumers are hungry for good value and they know where to go for it on the high street.”

He added: “Another factor is the ability of bigger brands to invest in their products and to expand into new locations. When the public choose where to eat out – whether it’s simple food-on-the-go, a sit-down snack or sandwich, or a more formal meal – people are clearly voting for brands.”

The shift from independents to brands is particularly dramatic in the pub sector. Britain’s branded pubs have increased visits by a massive 65% over the past eight years. Independents have seen business tumble by 48%. It’s a similar story in the full-service sector (excluding cafes & bistros) where brands have grown visits by +39% over the past eight years, while independents have slipped -28%. For the QSR sector, the changes are +22% (brands) and -14% (independents).

Lavenant added: “Thousands of independent pubs have closed down because they have not followed the market trends for a broad range of good quality food served in a child-friendly environment. Yes, we all know an excellent independent pub or restaurant that does a great job with food but they only make up a small part of the overall independent sector.”

The NPD Group says independents are likely to find it more difficult to compete against the big brands over the next 10 years. However, one bright spot is the extraordinary success of street food, although this is still a small part of Britain’s wider foodservice market. “But do remember that many of the big foodservice outlets we know today started as small independents. So there is clearly room for new players but they must offer something exciting and different or they will not succeed,” concluded Lavenant.

Tags : chainsFoodserviceindependentsmarket shareNPD Groupresearch
Andrew Seymour

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